Copyright © 2009 The Brattle Group, Inc. Antitrust/Competition Commercial Damages Environmental Litigation and Regulation Forensic Economics Intellectual Property International Arbitration International Trade Product Liability Regulatory Finance and Accounting Risk Management Securities Tax Utility Regulatory Policy and Ratemaking Valuation Electric Power Financial Institutions Natural Gas Petroleum Pharmaceuticals, Medical Devices, and Biotechnology Telecommunications and Media Transportation The Impact of Informational Feedback on Energy Consumption Sanem Sergici, Ph.D. Ahmad Faruqui, Ph.D National Town Meeting on Demand Response and Smart Grid June 24, 2010

National Town Meeting What is informational feedback? ♦ The provision of information to customers about their energy consumption patterns and costs ♦ There are two types Indirect feedback: information processed in some fashion before it reaches customers (e.g. detailed billing treatments) Direct feedback: information readily available upon demand by the customer, e.g., through an “in-home display (IHD)” device

National Town Meeting IHDs provide several benefits Customers ♦ Lower bills ♦ Feeling of being in control ♦ Smaller carbon footprint Utility ♦ Avoided incremental capacity and T&D investments ♦ Energy savings may contribute towards RPS and EERS in certain states ♦ Smaller carbon footprint would help cope with emerging federal carbon pricing policy ♦ IHDs used in conjunction with time-varying rates may also augment demand response

National Town Meeting Are the benefits real? We reviewed a dozen pilot programs to see if customers responded to IHDs by lowering energy consumption and reducing peak demand ♦ In our review, we address the following considerations Structure of the pilot program Energy consumption impacts of IHDs Demand response impacts of IHDs Customer opinions about the usefulness of IHDs

National Town Meeting Programs reviewed

National Town Meeting Programs reviewed (cont’d)

National Town Meeting Limitations The pilots considered in this study are heterogeneous in terms of pilot structure and design ♦ Utilities and geographic locations involved in the pilot studies vary widely, as do the demographics of the consumers ♦ Consumers are subject to various electricity tariffs ♦ Only a few involve randomly selected and balanced treatment and control groups ♦ Only a few tested for persistence of the impacts We are unable to control for differences in the structures of the pilots

National Town Meeting The bottom line Direct feedback provided by IHDs encourages consumers to make more efficient use of energy Energy savings range from 2.7% to 18%, with an average of 7% When combined with an electricity prepay program, energy savings are about twice that amount In a few cases ♦ The effects of time-varying rates on peak demand and energy consumption are augmented by IHDs

National Town Meeting Estimated pilot impacts

National Town Meeting An agenda for the future Is the information itself useful to customers, or do IHDs simply serve as a physical reminder to conserve? Are the impacts going to persist over time? How would IHDs work with dynamic pricing? Are customers willing to pay for IHDs?

National Town Meeting References Faruqui, Ahmad, Sanem Sergici, and Ahmed Sharif (2010), “The Impact of Informational Feedback on Energy Consumption - A Survey of The Experimental Evidence,” Energy 35 (2010), Faruqui, Ahmad, Ryan Hledik, and Sanem Sergici, “Piloting the smart grid,” The Electricity Journal, August/September, Darby, Sarah (2006), “The Effectiveness of Feedback on Energy Consumption- A Review for DEFRA of the Literature on Metering,” Billing, and Direct Displays, Oxford, United Kingdom. metering-report.pdf metering-report.pdf

National Town Meeting The Brattle Group Climate Change Policy and Planning Cost of Capital Demand Forecasting and Weather Normalization Demand Response and Energy Efficiency Electricity Market Modeling Energy Asset Valuation Energy Contract Litigation Environmental Compliance Fuel and Power Procurement Incentive Regulation Rate Design, Cost Allocation, and Rate Structure Regulatory Strategy and Litigation Support Renewables Resource Planning Retail Access and Restructuring Risk Management Market-Based Rates Market Design and Competitive Analysis Mergers and Acquisitions Transmission The Brattle Group provides consulting and expert testimony in economics, finance, and regulation to corporations, law firms, and governments around the world. We combine in-depth industry experience, rigorous analyses, and principled techniques to help clients answer complex economic and financial questions in litigation and regulation, develop strategies for changing markets, and make critical business decisions. Contact Sanem Sergici and Ahmad Faruqui at 44 Brattle Street 353 Sacramento Street Cambridge MA San Francisco, CA 94111